Institutional Determinants of Employment Chances. The Structure of Unemployment in France and Sweden

Abstract

Linked employer–employee data for Sweden and France are used to test competing hypotheses about the structure of unemployment in France and Sweden derived from a comparison of their welfare‐state structures, labour‐market institutions, and the linkages between their educational system and labour market. Contrary to standard predictions derived from welfare‐state theory, the unemployment structure of France does not conform to the classic insider‐outsider labour‐market model that scholars generally attribute to conservative welfare‐state regimes. Instead, France has a flexible two‐tier labour marker that produces relatively high entry rates into employment along with the strong age and educational gradients in exit rates that would be expected for a country with high firing costs. Even during the deep recession of the early 1990s, Sweden was also characterized by a strong age gradient in the rate of exit from an employer. However, Swedish rates do not show a strong education gradient, which is the expected consequence of Sweden's loosely linked school and work institutions, and extensive active labour‐market policies. Active labour‐market policies during the Swedish recession of the early 1990s appear to have further changed the shape of the age‐unemployment curve in that country by raising the exit rate of older workers more than would have resulted from the dynamics of labour demand alone.